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Part of the joy of travelling comes from experiencing the unfamiliar – a different climate, culture or cuisine. But when it comes to paying for things abroad, we might feel more comfortable using the currency we are most familiar with, the one we use at home.
This has recently become a common – and expensive – option for tourists withdrawing money from cash machines, or paying electronically in shops and restaurants.
When a restaurant bill arrives for example, foreign customers may be offered the choice on the card reader to pay in their home currency rather than the local one. This feature, known as “dynamic currency conversion” or “currency choice” sounds appealing at first – a service which has done the hard work for you, converting the bill to a currency you understand, giving you a better idea of how much money you are spending.
But it comes at a price – as the fees charged for this convenience can be exorbitant. In fact, one study shows that the average fee applied to this kind of conversion is a whopping 7.6%, more than double the cost of paying in the local currency (usually between 1.5% and 3%).
So suppose a French traveller goes out for dinner in a British town, and the final bill comes to £88.43, the equivalent of €100. Paying in UK currency, which would then converted to euros by the French diner’s bank, would lead to a payment of around €102. But using the dynamic currency conversion to pay the restaurant bill directly in euros would end up costing them €107.60.
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